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Invoice factoring, explained plainly
No jargon and no sales pitch. Straight explanations of how factoring works, what it really costs and how to read the fine print before you sign.
How invoice factoring works, step by step Invoice factoring works by selling your unpaid B2B invoices to a factor, which advances you commonly 70% to 90% of the invoice value within a day… Invoice factoring rates explained: fees, advance rates and true annual cost Invoice factoring rates commonly run roughly 1% to 5% of invoice value per 30 days, with advance rates of about 70% to 90%. How to qualify for invoice factoring To qualify for invoice factoring, you need unpaid invoices owed by creditworthy businesses or government agencies for work already completed,… Factoring vs. line of credit: which one fits your business? A bank line of credit is usually cheaper than factoring, but it is harder to get and can be reduced or called. Factoring vs. asset-based lending (ABL): differences, costs and when to switch Factoring buys individual invoices and suits smaller or less established companies; asset-based lending is a revolving loan against a borrowing… Factoring vs. SBA loan: speed, cost, collateral and using both An SBA loan is far cheaper than factoring over time but commonly takes 30 to 90 days, requires personal guarantees and usually liens most business… Factoring vs. merchant cash advance: real cost, repayment and how to switch For B2B businesses, factoring is usually far cheaper than a merchant cash advance. Invoice factoring vs. purchase order financing Invoice factoring advances cash against invoices for goods or services you have already delivered. Recourse vs. non-recourse factoring: what you’re actually buying In recourse factoring, you buy back any invoice your customer doesn’t pay. Notification vs. non-notification factoring Notification factoring means your customers are told, through a notice of assignment, to pay the factor directly. UCC liens and intercreditor agreements in factoring A factor needs first priority on the receivables it buys. What a factoring proposal should include A complete factoring proposal states the advance rate, the full fee schedule by day, monthly minimums, contract term and auto-renewal, termination… How to choose a factoring company Choose a factoring company on fit first, then true cost, then contract flexibility. Spot factoring vs. whole-ledger factoring Spot factoring sells a single invoice, or a few, with no ongoing contract. Will factoring hurt my customer relationships? Factoring rarely hurts customer relationships when it is handled well.
Looking for a term? The factoring glossary defines more than 80 of them in plain English.
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